Motion Digest Network

Just weeks after Malaysians pushed back against a ministerial proposal to ban motorcycles from entering capital city Kuala Lumpur in the name of reducing carbon emissions, the latest news from Taiwan’s green vehicle segment may show a better way forward.

On Feb 7, 2017, China Post reported that sales of electric bikes hit 20,000 units in 2016, citing the latest statistics from the Ministry of Economic Affairs. That was an increase of 98% from corresponding 2015 sales figures.

While that number is small compared to 13.67 million motorcycles on Taiwanese roads based on official government data, it was a significant milestone for the ministry — prior to 2016, Taiwan’s total electric bikes sold for seven years between 2009 and 2015 was just 40,000 electric motorbikes.

The upsurge in 2016 may indicate that electric bikes could be gaining traction among Taiwanese riders, thanks to Electric Vehicle Incentives rolled out in 2009 to encourage riders to make the switch.

These Electric Vehicle Incentives help by providing both tax exemptions and subsidies for electric bike purchases. Reports say the subsidies include NT$7,200 (RM1,033.21) for the purchase of a light duty electric bike, while the aid is increased to NT$10,000 (RM1,435.02) for heavy duty electric bike.

Taiwan’s economics minister, Lee Chih-kung, said the electric vehicle zero-taxation will remain in place up to year 2021 as the ministry seeks to double the sales to 40,000 in 2017, Focus Taiwan reported.

Electric Vehicle Subsidies will also be continued as the ministry targets 200,000 units electric vehicles annually by 2021. Taiwan aims to have a charging station density of one per every kilometre.

While Taiwan is seeing baby steps at the moment, the momentum is clearly there. A crucial point is the electric vehicle incentives are aimed at the demand end of the supply chain spectrum: the end-user.

This is different from Malaysia’s approach to electric vehicles. The end-target seems comparable: Malaysia, among others, has announced a target of having 100,000 electric vehicles on its roads by year 2020.

However, the government’s approach in pursuing the goal seems disjointed at the moment. At present, there are no electric vehicle incentives tailored specifically to make the mass transition to electric alternatives more affordable.

Malaysia did allow tax breaks for cheaper hybrids and Electric Vehicles from 2011 up to 2013, but the electric vehicle incentives were then discontinued, cutting short a brief upsurge in Electric Vehicle sales. Today, the only electric vehicle incentives that remain are largely tax breaks for the luxury hybrid models assembled locally.

This means that while commentators have praised Malaysia’s incentives for energy-efficient vehicles as better than Indonesia and Thailand — two other major car-manufacturing countries in Southeast Asia —the electric vehicle incentives do not benefit a majority of Malaysians.

Electric Vehicle Incentives Paradox

Paradoxically, the tax exemptions for locally assembled hybrids and Electric Vehicles meant they were enjoyed by higher-end models such as the BMW 330e and Mercedes-Benz’s C350e sedans, both launched last year.

In other words, the current electric vehicle incentives in Malaysia help high income drivers purchase luxury hybrids and Electric Vehicles, while the absence of similar incentives for lower-range products had raised the affordability barrier for other drivers.

News reports place the C350e’s starting price at RM289,888 up to RM299,888. Meantime the 330e’s pricing begins at RM248,800.

Notably, the 330e model sans incentives would cost the road user up to RM368,800. That is a 48% difference or RM120,000 for each 330e unit.

Given the luxury Electric Vehicles are out of reach for most Malaysian drivers, the foregone tax revenue could have been put to much better use and achieve a more widespread impact.

An immediate and obvious example would be to use the revenue to subsidise the cheaper hybrids and Electric Vehicles so as to encourage mass adoption. Taking Taiwan’s example, the electric vehicle subsidies may even be used to help the low-income group switch to electric bikes.

Malaysia already has the ingredients to make this work — Penang-based Eclimo, for example, is now into its ninth year of producing electric scooters and is already exporting its electric scooters overseas.

While still small-scale and prohibitively costly for individual buyers, electric vehicle subsidies from the government may help buyers overcome the cost hurdle. Eclimo previously told Motion Digest that it can lower its cost by up-scaling production when it shifts into the mass market eventually.

“To encourage buying of electric vehicles, there must be incentives given by the government to the end-consumer by way of personal tax exemption or direct subsidies,”said Eclimo’s executive director Dato’ Dennis Chuah.

This is on top of excise duty exemptions currently granted to its locally manufactured electric scooters, Chuah adds.

For perspective, presently Eclimo’s electric scooter would reportedly cost RM18,000 for an individual customer to purchase, before taking into account potential savings from upscaling its production.

That’s still far more accessible to most Malaysians than six-digit luxury Electric Vehicles. To illustrate the point, the foregone tax income on a BMW 330e — RM120,000 — could buy 6.7 Eclimo electric scooters outright, likely more if packaged as electric vehicle subsidies.

The easiest way to have 100,000 electric vehicles on Malaysian roads by 2020 remains the volume game — pushing for mass adoption of relatively cheap electric bikes is far less daunting than doing the same with luxury electric Vehicles.

And that suggests a massive rethink of the nation’s Electric Vehicles incentives is quite overdue.